The record low rates on new fixed mortgages are in danger due to rising costs
faced by banks.

Home owners have just a short window of opportunity to lock into the lowest-ever fixed mortgage deals before rates rise, experts have warned.

Lenders are preparing to push up the rates on new fixed deals because the cost of funding these loans has risen considerably.

Mortgage rates have been slashed to record lows in the wake of government schemes to stimulate the property market.

Two-year fixed rates are now available at less than 1.5pc. In July, The Telegraph reported that analysis of the home loan market showed it was the best time to remortgage in six years, with half of borrowers able to save money by taking out a new deals.

Since then, the money market rates underpinning these attractive offers have started to climb, reflecting the improving strength of the UK economy.

Banks typically price their fixed mortgages according to the rates on the money markets “swaps”. Over the past week, the rate on five-year swaps has risen from 1.77pc to 2.01pc.

Already, some lenders are removing their best buy mortgages or pushing up rates. Yorkshire Building Society today increased the rate on its five-year fixed rate for the second consecutive week. The rate was 2.44pc two weeks ago. Today it is 2.59pc.

Tomorrow, First Direct will increase the rate on its five-year deals for customers with a 10pc deposit. Its 4.19pc deal will then cost 4.39pc. Norwich & Peterborough and Nationwide have also made moves to increase rates.

Andrew Hagger, an independent personal finance researcher at Moneycomms, said: “Money market swap rates increased significantly last week, with a massive spike on Thursday. We must now wait to see whether these higher rates hold, but already lenders are starting to increase mortgage rates.”

David Hollingworth, a broker at London & Country, said: “Mortgage rates are not as directly linked to swap rates as they once were.

“But lenders cannot ignore the cost of funding going up, so if you are thinking of taking a fixed rate, there is very little to suggest rates are going to get better.

Mr Hollingworth added that lenders are still competing fiercely for business, as Britain’s property market rejuvenation continues. This should keep rates from rising rapidly. Further downward pressure could arrive when the second stage of the Government’s Funding for Lending Scheme is launched in January. This will provide a government-backed mortgage guarantee to customers who put down a 5pc deposit when moving home.